Venture: UK Small Cap
Issue 2;
This UK small cap was devastated by the pandemic. The shares are now dirt cheap and, following today’s announcement, have less risk.
The Restaurant Group (RTN)
RTN today announced the sales of 75 of its 380 sites to the Big Table Group. These sites comprise its leisure business, and this sale will reduce debt and increase margins for the group. The leisure business lost £65 million last year from brands such as Chiquito’s and Frankie and Benny’s.
What remains are the more compelling and more culinarily sophisticated likes of Wagamama and Brunning and Price. RTN also has multi-brand concessions at UK airports, which are vibrant locations. I show RTN’s sales over the years and the market cap. Price sales is 0.4, having averaged 1.2x and touched 2.5x on occasion.
Pandemic aside, there has been pressure in mid-range dining on the high street, but the premium brands have performed better, and this is where RTN is headed. The earnings have been falling for the past few years, along with the soft patch in mid-range dining and the pandemic. But that ended in January this year. Since then, we have seen upgrades, and this news will inevitably lead to more. The analysts’ consensus average share price is 66.2p, with some upgrades today to 70p, including one to 77p.
This is a relatively simple situation. RTN are slimming down and focusing on their best assets. If the company manages to recover their operations, that value will be realised. The other thing worth mentioning is the CEO is Andy Hornby… Yes, that one from HBOS in 2008. The good news is the other companies associated with him fared better, and he was never a banker in the first place.
Risk
A consumer recession is a risk, but I would argue that by going upmarket and selling the lower-end brands, they will be more insulated. The bottom line is that RTN withstood the lockdowns, and that ought to give us confidence. It is a simple case of realising value.
Please let me know your thoughts by emailing me at charlie.morris@bytetree.com or tweeting me @AtlasPulse.
Many thanks,
Charlie Morris
Editor, Venture
Venture is issued by ByteTree Asset Management Ltd, an appointed representative of Strata Global which is authorised and regulated by the Financial Conduct Authority. ByteTree Asset Management is a wholly owned subsidiary of CryptoComposite Ltd.
General - Your capital is at risk when you invest, never risk more than you can afford to lose. Past performance and forecasts are not reliable indicators of future results. Bid/offer spreads, commissions, fees and other charges can reduce returns from investments. There is no guarantee dividends will be paid. Overseas shares - Some recommendations may be denominated in a currency other than sterling. The return from these may increase or decrease as a result of currency fluctuations. Any dividends will be taxed at source in the country of issue.
Funds - Fund performance relies on the performance of the underlying investments, and there is counterparty default risk which could result in a loss not represented by the underlying investment. Exchange Traded Funds (ETFs) with derivative exposure (leveraged or inverted ETFs) are highly speculative and are not suitable for risk-averse investors.
Bonds - Investing in bonds carries interest rate risk. A bondholder has committed to receiving a fixed rate of return for a fixed period. If the market interest rate rises from the date of the bond's purchase, the bond's price will fall. There is also the risk that the bond issuer could default on their obligations to pay interest as scheduled, or to repay capital at the maturity of the bond.
Taxation - Profits from investments, and any profits from converting cryptocurrency back into fiat currency is subject to capital gains tax. Tax treatment depends on individual circumstances and may be subject to change.
Investment Director: Charlie Morris. Editors or contributors may have an interest in recommendations. Information and opinions expressed do not necessarily reflect the views of other editors/contributors of CryptoComposite Ltd. ByteTree Asset Management (FRN 933150) is an Appointed Representative of Strata Global Ltd (FRN 563834), which is regulated by the Financial Conduct Authority.
© 2024 Crypto Composite Ltd